Posts tagged "facility"

It goes without saying that major changes are taking place in the healthcare industry nationwide. The Affordable Care Act otherwise known as “Obamacare” became effective January 1, 2014. This legislation represents the most significant overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965. For real estate investors, the big question is what impact this regulatory overhaul of mandates, subsidies and insurance exchanges will have on commercial real estate.

Here is a quick glance at some of the most compelling trends taking place in hospital supply and demand. It illustrates the struggles healthcare systems are facing to stay in business.

There is no doubt a wave of consolidations is reshaping the U.S. healthcare industry. Generally, in a merger, the smaller hospital is looking to increase its financial stability and gain access to capital. The larger one is looking to increase market share and the number of patient referrals it gets from doctors.

As a result, we’re starting to see more and more mergers between healthcare systems who want to team up to remain competitive. In Central Pennsylvania alone there are four main examples of mergers taking place, each for unique reasons, but with the same goal in mind – to rein in costs and expand access. Let’s take a closer look at each one.

In January 2015, the same time in which the Penn State Board of Trustees announced its approval of the propose acquisition of St. Joseph Regional Health Network, the Board also announced its approval of the proposed merger with PinnacleHealth. From Penn State’s perspective, the benefits are obvious. This merger will allow them to grow a long-term patient and revenue base to better support its academic and research missions.

Additionally, the merger will allow Penn State Hershey to have lower-acuity patients treated at one of Pinnacle’s three hospitals, freeing more beds at the medical center for higher-complexity cases that a teaching hospital can best serve. As a result, this will help to increase hospital occupancy rates at both PinnacleHealth and Penn State Hershey.

Possibly the most compelling reason for this merger is the projected economic savings. The first five years should create at least $260 million in savings for both entities through avoided capital and operating costs. The recurring long-term savings is estimated to be at least $86 million annually. It was agreed upon that Penn State University will be the parent entity in this merger. Final action is tentatively scheduled for later this month.

In this merger (more appropriately referred to as an “affiliation”), a small Catholic health system formally joins with a large, technologically-advanced system in an effort to continue to make healthcare accessible and affordable to the most people. Now as a Geisinger Affiliate, Holy Spirit will undergo some major upgrades including an expanded emergency room, improved electronic infrastructure (with an emphasis on electronic medical records) and use of technology to deliver evidenced-based treatments.

In return, Geisinger receives an entry into the highly competitive Harrisburg healthcare market. PinnacleHelath just recently opened a $100 million hospital within a few miles of Holy Spirit in Cumberland County. While there are currently no major plans to downsize, the Holy Spirit-Geisinger union maintains that this aspect of the hospital will be continually monitored and adjusted as needed.

3. Lancaster General and University of Pennsylvania Health System

Earlier this month, Lancaster General Health and University of Pennsylvania Health System signed a non-binding letter of intent to negotiate a definitive agreement for their merger. Each organization brings a unique size, focus and geography that differs from the other. One of the largest benefits of this merger, aside from their entry into a new market, is the ability for patients to receive treatment at one facility and follow-up at another.

LG Health President and CEO Tom Beeman identified healthcare reform as the driving force behind this merger (and many of the other mergers we are presently seeing). To survive, Beeman said, it’s pretty clear nonprofit systems are “going to have to have a critical mass in the $5 billion to $10 billion range.”

The terms of the proposed deal between Lancaster General Health and University of Pennsylvania Health System will remain confidential until both parties approve it, but things are expected to move forward in the coming weeks.

In October 2014, Wellspan (which was in the process of taking control of Lebanon’s Good Samaritan Health System) announced that it was also exploring a partnership with Philhaven behavioral services. Much like many of the other mergers, they said the purpose is to allow all organizations to work more efficiently and better manage costs to improve health outcomes and the patient experience.

In this particular merger, each healthcare system brings a slightly different focus. Wellspan/Good Samaritan is primarily focused on physical health while Philhaven specializes in behavioral conditions and mental health. Combined, these organizations will be better equipped to serve a broad range of patients at a fraction of the cost of trying to add these specialties independently. In addition, Ephrata Community Hospital became an affiliate of WellSpan in 2013.

The Impact on Commercial Real Estate

The velocity at which the healthcare industry is changing cannot be overestimated. While we are already experiencing disruption and change resulting from healthcare reform, technology, big data, regulatory and other impactful forces in the healthcare industry, it is simply too soon to accurately predict the full impact these changes will have on the commercial real estate industry.

Despite the uncertainty, we are seeing a number of trends such as an increasing demand for MOBs and heightened activity in this asset class, both of which reflect the healthcare industry’s changing real estate needs. The demand for primary and urgent care facilities is already strong, with so many changes underway and record-breaking medical practice consolidations and mergers, as well as acquisitions of medical practices by large facilities also taking place.

While many changes may reflect the cyclical nature of real estate, the questions remain to what extent the cycle will be guided by outside forces and how investors will respond.

What is your prediction for the future of healthcare real estate? Join in the conversation by commenting below!

A joint venture, three years in the making, between Omni Realty Group and Triple Crown Corporation will officially open its doors to a premiere medical facility in Perry County.

Outside the Medical Professional Center of Newport

This space will house state of the art imaging including MRI, CT, Mammography and X-Ray; laboratory services; cardiology care and cardiology diagnostic testing; and physician specialists – including endocrinology, obstetrics/gynecology, orthopedics, urology and others.

State-of-the-art medical equipment is one of the many benefits the Medical Professional Center of Newport brings to Perry County.

This major project began in January 2012 when Mike Kushner, owner of Omni Realty began researching possible locations for the facility. One of the biggest challenges was finding a well-located tract of land with public water and sewer in Perry County’s semi-rural areas. While it took some time to locate the right land for this project, it was also one of the most critical details to secure.

Mike was successful in finding the ideal location for the facility, named The Medical Professional Center of Newport, on Bretz Court off of Shortcut Road in Howe Township. The new space will allow for many healthcare professionals to move into a shared space that will make quality healthcare more convenient and accessible for Perry County residents.

A look at the community gathering area inside the Medical Professional Center of Newport

“PinnacleHealth is pleased to partner with other healthcare providers in Newport to bring expanded and comprehensive outpatient healthcare to Perry County residents,” states Michael A. Young, president and CEO for PinnacleHealth. “Adding increased access to primary care and outpatient services is part of PinnacleHealth’s implementation plan based on the recent Community Health Needs Assessment completed last year.”

PinnacleHealth FamilyCare, who has operated a family practice presence in Newport for many years, will relocate from its office at 28 Shortcut Road and occupy 20,000 square-feet of this new space. Two additional medical office condos have been built and sold to local practitioners, Sisson-Boyer Eyecare, LLC and Daniel Hengst, DMD, Dentistry. Upon opening, 100 percent of this facility will be occupied by medical professionals.

Inside the new dentist office located within the Medical Professional Center of Newport

The Medical Professional Center of Newport exemplifies an emerging trend in healthcare real estate strategies which is to develop a hub and spoke healthcare delivery model. The center will provide a central location for a majority of common healthcare needs. Perry County residents will now be able to receive primary care, specialty care, imaging and laboratory services at a single facility which will increase efficiencies and service of care.

What are your thoughts on this new facility opening in Perry County, Pennsylvania? Share your opinion by commenting below!